State will step in at JAL

26 October 2009

According to a report in the Nikkei business daily the Japanese government will step up its involvement in the reconstruction of Japan Airlines, aiming to ensure a turnaround in the fortunes of the struggling airline.

The reports says that the Enterprise Turnaround Initiative Corporation of Japan may take it over as early as this week. The enterprise buys the debt of companies in trouble and sends in turnaround specialists to help them restructure their operations.

Cabinet ministers have been discussing the idea and a task force set up by transport minister Seiji Maehara are planning to draw up JAL’s turnaround plan, including the use of public funds, as early as this month. But there is a belief that a state-backed body needs to lead the effort in order to have JAL implement restructuring steps that are strong enough for the company to be worthy of public money.

Japan Airlines recently announced plans to cut 6,800 jobs to save money. But the Kyodo news agency reports that JAL had decided to raise the number of jobs it would cut to 13,000 jobs. The company made a loss of 99bn yen ($1.08bn; £661m) between April and June.
Restructuring steps that the turnaround body will work out may include deep cuts in pension benefits to JAL employees and retirees.

The turnaround body will be in charge of holding talks with JAL’s creditor banks about a debt waiver while arranging for public fund injections into the airline.

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